Reasons to Invest Money
For all those urgent reasons there are to invest maybe the most important be to broaden or increase our retirement fund for being our current life expectancy higher than before. Nowadays, investments are the foundation of our future financial level. Bad investments can bring us negative turnovers and therefore decrease our future possibilities. You are looking at two options for your money, the first you can spend it or save it and invest it. According to the Bureau of Economic Analysis, personal savings of North Americans are very low comparing them to other developed countries. A low savings interest rate indicates that North American citizens are accumulating enough savings as to carry out successfully any emergency, and keep the life standard after retiring. Below you will find a list of why is it more important to save and invest than to spend.
- People live longer than before and need more money to keep on living
- Medical, educational, and insurance expenditures are still very high
- The more one saves now the better his future in what having money to recycle refers to
- By investing wisely you may better your life standards and increase your future wealth.
Without having to win the lottery you may accumulate an important retirement fund without having to dispose of great amounts of money. It is easier than what you can imagine. All that you need is time, money to deposit in regular periods of time and a return rate for your investments. The following arguments show how these three elements: time, money deposited and an investment rate interact in reaching your first million dollars.
- An amount of US$231,377 invested during 30 years, at 5% annual interest rate, will have a future value of one million dollars.
- If the return rate increases to 5 or 8%, the initial deposit will be reduced to US$99,377
- A US$99,377 deposit invested over a thirty year period, at 8% annual interest, will have a future value of a million dollars
- If you make regular deposits instead of investing a big amount , the sum of deposits will definitely decrease.
- US$15,051 deposited each year during 30 years, at 5% per year, has a future value of US$1 million.
- Earning a larger turnover reduces the annual deposit amounts.
- US$8,827 deposited each year during 30 consecutive years, at 8% annual interest rate, also has a future value of US$1 million.
- If you make monthly deposits instead of annual deposits the amount of each deposit will decrease more.
- US$1,202 deposited each month during 30 consecutive years, at 5% annual interest rate, will result in US$1 million.
- If you make weekly deposits instead of monthly ones the amounts will decrease even more
- US$276 deposited weekly during 30 consecutive years, at 5% annual interest rate will also result in US$1 million in the future.
- If the annual interest rate were increased from 5 to 8%, the weekly amount deposited would be the following:
- US$154 invested each week at an annual interest rate during 30 consecutive years would render a future amount of US$1 million.
- If we extend the investing period from 30 to 40 years and keep an annual interest rate of 8%, the weekly deposit would only be US$66.
- US$66 invested weekly, at 8% annual interest rate, during 40 consecutive years would be worth a million in the future.
From these varied options we arrive to the following conclusions:
- When longer the period, bigger the effects of recycling, which reduces the single initial amount or the diversified deposit amounts.
- While higher the turnover interest rate, higher will be the recycling effects, which reduces the initial amount or the diversified deposit amounts.
- While longer the period and higher the interest rate lower will be the single initial amount or the diversified deposit amounts.
The key to a successful financial plan is to keep apart a larger amount of savings and invest it intelligently, by using a longer period of time. The turnover rate in investments should exceed the inflation rate and cover taxes as well as allow you to earn an amount that compensates the risks taken. Savings accounts, money at low interest rates and market accounts do not contribute significantly to future rate accumulation. While the highest rates come from stocks, bonds, and other types of investments in assets such as real estate. Nevertheless, these investments are not totally safe from risks, so one should try to understand what kind of risks are related to them before taking action. The lack of understanding as how stocks work makes the myopic point of view of investing in the stock market ( buying when the tendency to increase or selling when it tends to decrease) perpetuate. To understand the characteristics of each one of the different types of investment can or may help you determine which of them is the right one for your needs.